It’s a classic conundrum: music industry sales are shrinking and at the same time interest and consumption of music is skyrocketing. A recent Wall Street Journal article by Damian Kulash Jr., lead singer and guitarist of rock band OK Go delves into some of the corners around which the new models are being built.

“We once relied on investment and support from a major label,” says Kulash. “Now we make a comparable living raising money directly from fans and through licensing and sponsorship. Music isn’t going away. We’re just moving out of the brief period—a flash in history’s pan—when an artist could expect to make a living selling records alone.”

Records became a music commodity in the sense that fans could experience music via a “discreet package.” The Internet changed that equation and global record sales plunged from about $27 billion in 1999 to $17 billion in 2009. Kulash ties the sales slide to the new freedoms afforded by the digital era. “Music is getting harder to define again,” he says. “It’s becoming more of an experience and less of an object. Without records as clearly delineated receptacles of value, last century’s rules—both industrial and creative—are out the window. For those who can find an audience or a paycheck outside the traditional system, this can mean blessed freedom from the music industry’s gatekeepers.”

One such artist profiled in the article is singer/songwriter Corey Smith who recently signed with Nashville-based Average Joe’s Entertainment whose roster includes Colt Ford, Brantley Gilbert and Josh Gracin. Smith’s manager Marty Winsch tells WSJ that his artist grossed about $4 million in 2008 from touring, merchandise and other revenue. Smith’s music is available FREE from his website in digital format and CDs can be purchased at discounted prices. So the music is used to promote touring rather than the reverse. “We don’t look at it as free, ” Winsch says. “When people come to the website and download the music, they’re giving us their time, their most valuable commodity.” Not surprisingly the Average Joe’s label deal is non-traditional with the artist reaping 50% of any net revenue.

So it makes sense to use the music to bolster ticket sales, but touring has also faced cutbacks and faltering demand this past year. The article notes that popular artists therefore are returning to the “centuries old logic” of patronage in the modern-day form of sponsorships and licensing. For unknown acts, however, these deals are harder to forge, but can offer creative freedom when successful. “Outside sponsors tend to take a broader view of success,” says Kulash. “The measuring stick could be mentions in the press, traffic to a website, email addresses collected or views of online videos. Artists have meaningful, direct, and emotional access to our fans, and at a time when capturing the public’s attention is increasingly difficult for the army of competing marketers, that access is a big asset.”

Kulash sums the overall dilemma nicely, “Music is getting harder to define again. It’s becoming more of an experience and less of an object. Without records as clearly delineated receptacles of value, last century’s rules—both industrial and creative—are out the window.”